Patanjali Foods Q2 Results: Net Profit Dips, Margin Contracts On High Costs

Margins came in at 2.3% as against 5.5% a year ago.

<div class="paragraphs"><p>Patanjali had acquired Ruchi Soya in an Corporate Insolvency Resolution for around Rs 4,500 crore.&nbsp;(Photo: BQ Prime)</p></div>
Patanjali had acquired Ruchi Soya in an Corporate Insolvency Resolution for around Rs 4,500 crore. (Photo: BQ Prime)

Patanjali Foods Ltd.'s second-quarter profit fell, impacted by several macro headwinds in edible oil segment, and margins contracted owing to high-cost inventory.

Standalone net profit of the consumer goods maker declined 32% over the previous year to Rs 112.28 crore in the three months ended September, according to its exchange filing.

Patanjali Foods Q2 FY23 (Standalone figures, YoY)

  • Revenue rose 42% at Rs 8.514.12 crore.

  • Operating profit dipped 41% to Rs 194.6 crore.

  • Margins came in at 2.3% as against 5.5% a year ago.

  • Cost of raw materials rose 46.7% to Rs 6711.56 crore. It was up 16.8% YoY.

The profitability was impacted as the quarter witnessed a steep decline in edible oil prices owing to demand-supply situation. Declining price trend left the industry with high-price inventory, with companies including Patanjali Foods, passing on the benefit of lower prices to the consumers.

Global prices of various edible oil fell by $400-500 per tonne in the three months ended September. "As India imports more than 60% of its edible oil requirement, retail prices came under pressure," the company said.

"This coupled with currency depreciation impacted margins during the quarter, the company said in a statement.

The inflation impact on operating cost added further pressure on margins.

"However, this is purely cyclical in nature and on account of events that the industry witnessed in the quarter."

During the quarter, the demand environment remained challenging with persisting high inflation along with fiscal measures taken by the central government including continuation of stock limits on oils and oilseeds, governments insistence on reduction in retail edible oil prices and passing of price benefits to the consumers, the company said.

Sales of Patanjali Foods’ food business, including the business acquired from its parent Patanjali Ayurved Ltd, stood at Rs 2,399.66 crore during the quarter contributing 37.18% to total branded sales.

On July 1, 2022, Patanjali Food completed the acquisition of foods business undertaking from Patanjali Ayurved on slump sale basis for Rs 690 crore. With the acquisition, the food product portfolio of the company has added 536 stock-keeping units over eight products categories such as ghee, staples, herbal products, honey, dry fruits, staples, spices and condiments, beverages and physically refined edible oils, including mustard oil. Overall, the food portfolio now comprises soya foods, biscuits, rusk and cookies, breakfast cereals and noodles, nutraceuticals and the foods business acquired from Patanjali Ayurved, according to the company.

Overall, the branded sales segment, including institutional segment, recorded sales worth Rs 6,453.45 crore comprising 77.02% to total sales, the company said.

During the quarter, the business mix of edible oil and food business of the company further improved to 74.66% and 28.18%, respectively, as against the previous year's 94.20% and 11.76%, respectively.

"Our focus for the next few quarters is to continue the accelerating growth of the highly profitable food vertical which shall ensure overall growth of the Ebitda margin of the company," the company said in a statement.

Patanjali Foods expects the food business to continue to grow at a higher pace keeping in mind the growing distribution network and wider availability across retail shelf.

Normal monsoons in most parts of the country and proactive interventions by the government and the Reserve Bank of India is expected to augur well for sustained recovery going forward, according to the company.